Crypto vademecum
The need of clarity
Some time ago, here at Inference we realized there is a steep learning curve that is required to interact with the crypto ecosystem. Every time you bring someone new into this world who was previously working on Web2, cybersecurity not related to smart contracts, or any other business with no ties to Web3, all the words coming at them might feel like jargon or a Jabba the Hutt scene. Just to clarify, it is not the fault of those that are already in Web3, there is absolutely no interest in making you feel excluded or not a part of this clique (not all of us, at least). As with every field, and even more so with such a technological one, specific terminology can often be unavoidable, making conversations difficult to follow and understand for newbies.
In order to improve the situation, we put together a small vademecum of common terminology you might encounter in our other posts or in a regular conversation regarding Web3, DeFi or crypto. This is just a starting point, as we would like to update it regularly to keep up and expand it as much as possible. If you have suggestions about which ones should be added next or you think one of our definitions is incorrect, or just not good enough, please let us know.
Note: some of these terms are not exclusive to the world of Web3 and crypto. The explanations provided are always in relation to their meaning and use in this space, but they could have other applications and meanings in different contexts. For example, “Turing complete” and “Bear market” are common terminologies in the world of theoretical computer science and finance, respectively.
Here we go.
The vademecum
Address: A string of characters that represents a destination for cryptocurrency transactions.
For further information refer to: https://academy.binance.com/en/glossary/address
Altcoin: Any cryptocurrency other than Bitcoin.
For further information refer to: https://www.investopedia.com/terms/a/altcoin.asp https://academy.binance.com/en/glossary/altcoin
Altcoin Season: A period when altcoins experience significant price increases relative to Bitcoin.
For further information refer to: https://crypto.com/university/what-is-altcoin-season https://www.binance.com/en/blog/fiat/altcoin-season-what-when-and-why-421499824684903712
APY (Annual Percentage Yield): The annualized rate of return for staking in a pool, including rewards and compounding.
For further information refer to: https://www.forbes.com/advisor/banking/what-is-apy/ https://www.investopedia.com/terms/a/apy.asp https://www.youtube.com/watch?v=4hcs__p-AYA
ATH (All-Time High): The highest price ever reached by a cryptocurrency or asset.
For further information refer to: https://www.fortrade.com/glossary/all-time-high-ath/ https://www.howtogeek.com/782933/what-does-ath-mean/
Atomic Swap: A smart contract technology that allows users to exchange one cryptocurrency for another without the need for a centralized exchange.
For further information refer to: https://www.investopedia.com/terms/a/atomic-swaps.asp https://www.bitpanda.com/academy/en/lessons/what-is-an-atomic-swap
Automated Market Maker (AMM): A smart contract-based algorithm that facilitates decentralized trading by automatically adjusting prices based on supply and demand.
For further information refer to: https://chain.link/education-hub/what-is-an-automated-market-maker-amm https://www.youtube.com/watch?v=htXEEVkiIJ0 https://www.youtube.com/watch?v=1PbZMudPP5E
Bear Market: A market characterized by declining prices over an extended period.
For further information refer to: https://www.britannica.com/money/bear-market https://www.investopedia.com/terms/b/bearmarket.asp
Blockchain: A distributed ledger technology used to record transactions across a network of computers.
For further information refer to: https://en.wikipedia.org/wiki/Blockchain https://www.investopedia.com/terms/b/blockchain.asp https://www.ibm.com/topics/blockchain
Bull Market: A market characterized by rising prices over an extended period.
For further information refer to: https://www.forbes.com/advisor/investing/bull-market/ https://www.investopedia.com/terms/b/bullmarket.asp
CFMM (Constant-Factor-Market-Maker): A type of automated market maker where the product of the quantities of two assets in a liquidity pool remains constant.
For further information refer to: https://en.wikipedia.org/wiki/Constant_function_market_maker https://web.stanford.edu/~boyd/papers/pdf/cfmm.pdf
Cold Wallet: A wallet that's not connected to the internet, providing higher security.
For further information refer to: https://www.bankrate.com/investing/what-is-a-cold-wallet/ https://www.ledger.com/academy/glossary/cold-wallet
Confirmation: The process of validating a transaction on the blockchain by miners or validators.
For further information refer to: https://originstamp.com/blog/what-are-blockchain-confirmations-and-why-do-we-need-them/ https://support.bitso.com/hc/en-us/articles/4414984898452-What-are-the-Bitcoin-confirmations-
Consensus Algorithm: The mechanism used by a blockchain to achieve agreement on the state of the ledger, such as PoW (Proof-of-Work), PoS (Proof-of-Stake), or DPoS (Delegated Proof-of-Stake).
For further information refer to: https://www.geeksforgeeks.org/consensus-algorithms-in-blockchain/ https://www.baeldung.com/cs/consensus-algorithms-distributed-systems
Cryptocurrency: Digital or virtual currencies that use cryptography for security. Include Bitcoin, Eth(Ethereum blockchain), Tez (Tezos blockchain), and many others.
For further information refer to: https://www.investopedia.com/terms/c/cryptocurrency.asp https://www.nerdwallet.com/article/investing/cryptocurrency https://www.forbes.com/advisor/investing/cryptocurrency/what-is-cryptocurrency/
DAO (Decentralized Autonomous Organization): An organization represented by rules encoded as a computer program that is transparent, controlled by organization members, and not influenced by a central government.
For further information refer to: https://www.investopedia.com/tech/what-dao/ https://consensys.net/blog/blockchain-explained/what-is-a-dao-and-how-do-they-work/
DApp (Decentralized Application): An application that runs on a blockchain, typically with no central authority.
For further information refer to: https://www.investopedia.com/terms/d/decentralized-applications-dapps.asp https://ethereum.org/en/developers/docs/dapps/
DEX (Decentralized Exchange): A cryptocurrency exchange that operates without a centralized authority.
For further information refer to: https://www.coinbase.com/de/learn/crypto-basics/what-is-a-dex https://chain.link/education-hub/what-is-decentralized-exchange-dex
DeFi (Decentralized Finance): Financial services and applications built on blockchain technology, without intermediaries like banks and (ideally) no governing party.
For further information refer to: https://www.techtarget.com/whatis/definition/decentralized-finance-DeFi https://www.youtube.com/watch?v=H-O3r2YMWJ4
Fiat Currency: Traditional government-issued currency like the US dollar, euro, or yen.
For further information refer to: https://www.investopedia.com/terms/f/fiatmoney.asp https://en.wikipedia.org/wiki/Fiat_money
FOMO (Fear of Missing Out): The fear that you'll miss out on potential profits, leading to impulsive investments.
For further information refer to: https://www.ledger.com/academy/glossary/what-is-fomo-in-crypto https://www.fool.com/terms/c/crypto-fomo/
Fork: A software or protocol upgrade that creates two separate versions of a blockchain.
For further information refer to: https://www.coinbase.com/learn/crypto-basics/what-is-a-fork https://en.wikipedia.org/wiki/Fork_(blockchain)
FUD (Fear, Uncertainty, Doubt): Negative information or rumors spread to create fear and panic in the market.
For further information refer to: https://www.ledger.com/academy/glossary/fud https://www.buybitcoinbank.com/cryptocurrency/fud-definition-meaning
Gas: The fee required to perform transactions or execute smart contracts on the Ethereum blockchain.
For further information refer to: https://www.kraken.com/learn/what-is-a-blockchain-gas-fee
Gas Exhaustion: When a transaction or smart contract runs out of gas before completing, causing the transaction to fail.
For further information refer to: https://dcxlearn.com/blockchain/what-does-higher-gas-limit-and-transaction-fees-implies-on-the-ethereum/ https://www.investopedia.com/terms/g/gas-ethereum.asp
Gas Limit: The maximum amount of gas a user is willing to pay for a transaction on the blockchain.
For further information refer to: https://ethereum.org/en/developers/docs/gas/ https://academy.binance.com/en/glossary/gas-limit
Gas Price: The amount of cryptocurrency paid per unit of gas for a transaction on the blockchain.
For further information refer to: https://coinmarketcap.com/alexandria/glossary/gas-price
Hard Fork: A type of fork that results in an incompatible change in the blockchain's protocol, leading to a split in the network.
For further information refer to: https://en.wikipedia.org/wiki/Fork_(blockchain) https://www.investopedia.com/terms/h/hard-fork.asp
HODL: A misspelling of "hold," referring to long-term cryptocurrency investment.
For further information refer to: https://www.forbes.com/advisor/investing/cryptocurrency/what-does-hodl-mean/ https://www.investopedia.com/terms/h/hodl.asp
Hot Wallet: A wallet connected to the internet, often used for convenience but less secure than cold wallets.
For further information refer to: https://www.gemini.com/cryptopedia/crypto-wallets-hot-cold https://www.investopedia.com/terms/h/hot-wallet.asp
ICO (Initial Coin Offering): A fundraising method where new cryptocurrencies are sold to investors.
For further information refer to: https://www.sgrlaw.com/what-are-icos-and-how-do-they-work/ https://en.wikipedia.org/wiki/Initial_coin_offering
Immutable: A property of blockchains where once data is recorded, it cannot be altered or deleted.
For further information refer to: https://www.solulab.com/what-is-immutable-ledger-in-blockchain-and-its-benefits/ https://academy.binance.com/en/glossary/immutability
Impermanent Loss: A temporary loss in the value of assets held in a liquidity pool due to price volatility.
For further information refer to: https://www.techopedia.com/definition/impermanent-loss https://www.ledger.com/academy/glossary/impermanent-loss https://www.youtube.com/watch?v=8XJ1MSTEuU0
Invariant: The mathematical equation that defines the constant product in a CFMM.
For further information refer to: https://en.wikipedia.org/wiki/Constant_function_market_maker https://blaize.tech/article-type/amm-types-differentiations/
KYC (Know Your Customer) and AML (Anti-Money Laundering): Regulations and processes for verifying the identity of cryptocurrency users to prevent illegal activities.
For further information refer to: https://www.thalesgroup.com/en/markets/digital-identity-and-security/banking-payment/issuance/id-verification/know-your-customer https://www.investopedia.com/terms/k/knowyourclient.asp https://www.innovatrics.com/glossary/anti-money-laundering-aml/ https://www.investopedia.com/terms/a/aml.asp
Limit Order: An order to buy or sell a cryptocurrency at a specific price or better.
For further information refer to: https://www.investopedia.com/terms/l/limitorder.asp https://www.schwab.com/learn/story/3-order-types-market-limit-and-stop-orders
Liquidity: The ease with which an asset can be bought or sold without significantly affecting its price.
For further information refer to: https://www.investopedia.com/terms/l/liquidity.asp
Liquidity Pool: A pool of funds provided by users to facilitate trading on decentralized exchanges (DEXs).
For further information refer to: https://www.gemini.com/cryptopedia/what-is-a-liquidity-pool-crypto-market-liquidity https://www.youtube.com/watch?v=cizLhxSKrAc https://www.youtube.com/watch?v=dVJzcFDo498
Liquidity Provider (LP): A user who contributes funds to a liquidity pool in exchange for fees and rewards.
For further information refer to: https://www.investopedia.com/terms/c/coreliquidityprovider.asp https://academy.binance.com/en/glossary/liquidity-provider
Market Cap: The total value of a cryptocurrency calculated by multiplying its price by the total supply.
For further information refer to: https://www.nerdwallet.com/article/investing/what-is-market-cap https://www.investopedia.com/terms/m/marketcapitalization.asp
Market Order: An order to buy or sell a cryptocurrency immediately at the current market price.
For further information refer to: https://www.schwab.com/learn/story/3-order-types-market-limit-and-stop-orders https://www.investopedia.com/terms/m/marketorder.asp
Mining: The process of validating and adding new transactions to a blockchain, often associated with proof-of-work (PoW) cryptocurrencies.
For further information refer to: https://freemanlaw.com/mining-explained-a-detailed-guide-on-how-cryptocurrency-mining-works/ https://www.coinbase.com/learn/crypto-basics/what-is-mining
Mutex (Mutual Exclusion): A programming technique used to prevent reentrancy attacks by locking a resource until it's no longer in use.
For further information refer to: https://www.techtarget.com/searchnetworking/definition/mutex https://en.wikipedia.org/wiki/Mutual_exclusion
Node: A computer or device connected to a blockchain network that maintains a copy of the entire blockchain and helps validate transactions.
For further information refer to: https://www.blockchain-council.org/blockchain/blockchain-nodes/ https://worldcoin.org/articles/what-is-a-blockchain-node
Oracles: External data sources or services that smart contracts can use to interact with the real world.
For further information refer to: https://chain.link/education/blockchain-oracles https://www.gemini.com/cryptopedia/crypto-oracle-blockchain-overview
P2P (Peer-to-Peer): Direct transactions or interactions between users without the need for intermediaries.
For further information refer to: https://www.investopedia.com/terms/p/peertopeer-p2p-service.asp https://www.britannica.com/technology/P2P
Private Key: A secret cryptographic key that allows access to a cryptocurrency wallet. Never share it.
For further information refer to: https://www.techtarget.com/searchsecurity/definition/private-key https://www.investopedia.com/terms/p/private-key.asp
Proof-of-Stake (PoS): A consensus mechanism where validators are chosen to create new blocks based on the amount of cryptocurrency they hold and are willing to "stake" as collateral.
For further information refer to: https://www.mckinsey.com/featured-insights/mckinsey-explainers/what-is-proof-of-stake https://www.forbes.com/advisor/investing/cryptocurrency/proof-of-stake/
Public Key: A cryptographic key that others can use to send you cryptocurrencies.
For further information refer to: https://www.techtarget.com/searchsecurity/definition/public-key https://en.wikipedia.org/wiki/Public-key_cryptography
Pump and Dump: A scheme where the price of a cryptocurrency is artificially inflated (pumped) to attract unsuspecting investors before it is sold off (dumped) at a profit.
For further information refer to: https://www.investor.gov/introduction-investing/investing-basics/glossary/pump-and-dump-schemes https://www.investopedia.com/ask/answers/05/061205.asp
Reentrancy Attack: A type of vulnerability where a malicious smart contract re-enters another contract to execute further actions before the first action completes, potentially leading to unauthorized fund transfers.
For further information refer to: https://www.quicknode.com/guides/ethereum-development/smart-contracts/a-broad-overview-of-reentrancy-attacks-in-solidity-contracts https://www.alchemy.com/overviews/reentrancy-attack-solidity
Rekt: A slang term used to describe a significant financial loss or failure in the crypto market.
For further information refer to: https://www.dictionary.com/browse/rekt https://www.techopedia.com/definition/rekt https://www.babypips.com/forexpedia/rekt
Rug Pull: A fraudulent DeFi project where developers take investors' money and disappear.
For further information refer to: https://www.bankrate.com/investing/what-is-a-rug-pull/ https://www.youtube.com/watch?v=xwEt2hgpMO8 https://www.youtube.com/watch?v=pgTVuCsUcKw
Security Token: A token that represents ownership in an asset, such as real estate or stocks.
For further information refer to: https://www.investopedia.com/terms/s/security-token.asp https://www.scorechain.com/resources/crypto-glossary/security-token
Slippage: The difference between the expected and actual price of an asset when executing a trade on an AMM.
For further information refer to: https://www.investopedia.com/terms/s/slippage.asp
Smart Contracts: Self-executing contracts with the terms of the agreement directly written into code. They are computer programs executed on the blockchain.
For further information refer to: https://www.ibm.com/topics/smart-contracts https://www.investopedia.com/terms/s/smart-contracts.asp https://en.wikipedia.org/wiki/Smart_contract
Smart Contract Audit: A comprehensive review of a smart contract's code and functionality to identify vulnerabilities and security risks.
For further information refer to: https://hedera.com/learning/smart-contracts/smart-contract-audit https://hacken.io/discover/smart-contract-audit-process/
Soft Fork: A type of fork that is backward-compatible and does not split the blockchain network.
For further information refer to: https://www.investopedia.com/terms/s/soft-fork.asp https://cointelegraph.com/learn/soft-fork-vs-hard-fork-differences-explained
Stablecoin: A cryptocurrency designed to have a stable value, often pegged to a fiat currency like USD.
For further information refer to: https://www.forbes.com/advisor/au/investing/cryptocurrency/stablecoins/ https://www.britannica.com/money/what-are-stablecoins
Staking: The process of participating in the validation of transactions on a PoS blockchain by locking up a certain amount of cryptocurrency.
For further information refer to: https://www.reuters.com/business/finance/what-is-staking-cryptocurrency-practice-regulators-crosshairs-2023-02-10/ https://www.coinbase.com/learn/crypto-basics/what-is-staking https://www.forbes.com/advisor/in/investing/cryptocurrency/what-is-staking-in-crypto/
Token: A digital asset representing ownership in a blockchain-based project or network.
For further information refer to: https://www.analyticsinsight.net/what-are-crypto-tokens-and-how-do-they-work/ https://www.coinbase.com/learn/crypto-basics/what-is-a-token
Tokenomics: The economic and incentive structure of a cryptocurrency or blockchain project.
For further information refer to: https://www.techopedia.com/definition/tokenomics https://academy.binance.com/en/articles/what-is-tokenomics-and-why-does-it-matter
Turing Complete: A term used to describe a blockchain or scripting language that can perform any computation that could also be performed in the best computational models known to mankind.
For further information refer to: https://academy.binance.com/en/glossary/turing-complete https://en.wikipedia.org/wiki/Turing_completeness
Utility Token: A token that provides access to a specific product or service within a blockchain ecosystem.
For further information refer to: https://stackbrowser.com/blog/utility-tokens https://www.ledger.com/academy/glossary/utility-token https://coinmarketcap.com/alexandria/glossary/utility-token
Validator: A participant in a Proof-of-Stake (PoS) blockchain who is responsible for validating and creating new blocks.
For further information refer to: https://www.ledger.com/academy/what-is-a-blockchain-validator https://www.binance.com/en-IN/feed/post/250145
Volatility: The degree of price fluctuations in a cryptocurrency or market.
For further information refer to: https://www.fidelity.com.sg/beginners/what-is-volatility/market-volatility https://www.investopedia.com/terms/v/volatility.asp
Wallet: A software or hardware tool used to store, manage, and interact with cryptocurrencies.
For further information refer to: https://www.investopedia.com/terms/b/bitcoin-wallet.asp https://www.coinbase.com/learn/crypto-basics/what-is-a-crypto-wallet https://www.forbes.com/advisor/investing/cryptocurrency/crypto-wallets/
Wallet Seed: A series of words used to recover a cryptocurrency wallet if it's lost or stolen.
For further information refer to: https://blockworks.co/news/what-are-seed-phrases https://en.bitcoin.it/wiki/Seed_phrase https://www.coinbase.com/de/learn/crypto-basics/what-is-a-seed-phrase
Whale: An individual or entity that holds a large amount of cryptocurrency.
For further information refer to: https://www.ledger.com/academy/glossary/whale https://www.investopedia.com/terms/b/bitcoin-whale.asp
Whitepaper: A document that outlines the technology, purpose, and goals of a crypto-project.
For further information refer to: https://www.investopedia.com/terms/w/whitepaper.asp https://www.techtarget.com/whatis/definition/white-paper
Yield Farming: A DeFi strategy where users provide liquidity to earn rewards or interest.
For further information refer to: https://www.youtube.com/watch?v=XgXL_X3bH70 https://www.youtube.com/watch?v=tO0R2rkeRfU https://hedera.com/learning/decentralized-finance/defi-yield-farming https://coinmarketcap.com/alexandria/article/what-is-yield-farming
